Halliburton Sheds More Jobs, Looks to North America Recovery

  • Cut about 5,000 from global workforce in second quarter
  • Paid $3.5 billion fee to Baker Hughes for failed merger

Halliburton Co. cut another 5,000 jobs in the second quarter as it positioned itself for a recovery in North America in the second half of the year.

The world’s largest provider of hydraulic-fracturing work reported a loss of $3.21 billion, or $3.73 a share, compared with net income of $54 million, or 6 cents, a year earlier, according to a statement Wednesday. Excluding certain items, the loss was 14 cents a share, better than the 19-cent average loss of 38 analysts’ estimates compiled by Bloomberg. More than a third of the company’s workforce has been eliminated since the downturn began in late 2014.

"We believe the North America market has turned," Chief Executive Officer Dave Lesar said in the statement. "We expect to see a modest uptick in rig count during the second half of the year."

Lesar’s prediction in April that the U.S. rig count would bottom out in the second quarter has so far proved true. As rigs become more efficient, U.S. explorers will need less than half the rigs they used during the last peak, President Jeff Miller told analysts and investors Wednesday on a conference call, adding that "900 is the new 2,000."

Staff Cuts

The company cut nearly 9 percent from from its global headcount in the second quarter, leaving staff at 50,000, Emily Mir, a spokeswoman, wrote in an e-mail.

Halliburton, which generates nearly half its sales from the U.S. and Canada, reported a North American operating loss of 8.2 percent, more than triple its first quarter drop. Sales dropped 43 percent compared with a year earlier.

The company expects to stem the losses in North America and break even by the first quarter of next year, Chief Financial Officer Mark McCollum said on the call. He also forecast that the operating loss margin should improve by 100 to 200 basis points in the third quarter.

"Price negotiations have been a bar-room brawl," Miller said. "In certain situations, as we’ve seen signs of recovery, we’ve elected to walk away from money-losing jobs in recent months."

"I don’t think many people had high expectations for the second quarter, given that even in the quarter the rig count was still dropping," said Rob Desai, an analyst at Edward Jones in St. Louis who rates the shares a buy and owns none. "The outlook was the most important thing."

Halliburton fell 1.8 percent to $44.39 at 12:03 p.m. in New York along with other oilfield contractors.

Spending Cuts

The first three months of the year finally saw all four of the world’s biggest oil services providers move into the red in North America. To survive the worst oil market downturn in a generation, explorers have slashed spending by half in the region. Halliburton is about halfway to its goal of cutting $1 billion in its annual costs, which is expected to be achieved by the end of the year, Miller said.

In May, Halliburton called off a $28 billion merger with Baker Hughes Inc. after facing resistance from regulators in the U.S. and Europe over antitrust concerns. The company paid Baker Hughes a $3.5 billion breakup fee during the second quarter.

Halliburton took a promissory note from "its primary customer" in Venezuela in exchange for $200 million of outstanding trade receivables, according to the statement.

McCollum said at an investor conference last month that the company has a "need to really hit the brakes" in Venezuela because it’s not getting paid for the work being done there. The company said in May the amount it was owed in the country rose 7.4 percent in the first quarter to $756 million.

Schlumberger Ltd., the biggest oil services provider, is scheduled to report second-quarter results on Thursday.

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